Acquisition of DEKA for €61.8 million

Accelerates growth strategy and provides increased presence in Europe

Volex plc (AIM:VLX), the global supplier of integrated manufacturing services and power products, is pleased to announce it has signed a share purchase agreement for the proposed acquisition of the entire issued share capital of De-Ka Elektroteknik Sanayi ve Ticaret Anonim Şirketi (“DEKA”), for a total consideration of up to €61.8 million, on a debt-free basis (the “Acquisition”).

The Acquisition is expected to close in January 2021, subject to approval by the Turkish Competition Authority and admission of the Consideration Shares (as defined below) to trading on AIM.

About DEKA

• DEKA is a leading power cord manufacturer for the European white goods market
• Headquartered in Kocaeli, Turkey, with three production facilities and approximately 450 employees, it is strategically located in a low-cost region close to Europe
• Like Volex, DEKA has shown a resilient performance through the period of the Covid-19 pandemic and reported unaudited sales of €33 million for the nine months ended 30 September 2020
• DEKA has best-in-class automation, full vertical integration and a strong management team who are expected to remain with the business

Strategic Rationale

• DEKA offers exciting organic growth potential, providing Volex with increased market share in attractive end market segments
• Expands Volex’s presence in Europe, a key market for Volex’s capabilities
• Provides additional diversity to Volex’s business in terms of customers and end-markets
• Increased scale should allow the enlarged Volex group to continue to improve our cost structure and realise procurement savings and reductions in engineering and safety approval costs

Financial Highlights

• Track record of consistent and long-term profit growth – eight-year revenue and EBITDA CAGR of 9% and 28%, respectively
• For the year ended 31 December 2019, DEKA generated audited sales of €44.3 million and operating profit of €6.5 million
• Acquisition multiple represents 6.9x DEKA’s expected 2021 EBITDA
• Acquisition is expected to be earnings enhancing after the first full year of ownership
• Following the Acquisition, Volex’s ROCE is expected to exceed 25%

Transaction Structure

• Acquisition of DEKA for initial cash consideration of €37million and €9.8 million to be satisfied by the issue of 3.32 million ordinary shares in Volex (the “Consideration Shares”) to the sellers on Completion
• Deferred cash consideration of €2.0 million payable in January 2022
• Deferred contingent cash consideration of up to €13.0 million in cash, which may be payable within two years of Completion based on certain profit targets of DEKA being met
• The Consideration Shares are subject to a six-month lock-up, and an application will be made to the London Stock Exchange for the admission of the Consideration Shares to trading on AIM (“Admission”) on Completion
• The initial and deferred cash consideration will be funded through new debt facilities
• Completion of the Acquisition is expected to occur in January 2021, subject to approval by the Turkish Competition Authority
• Leverage of enlarged Volex Group, defined as net debt/pro-forma EBITDA (based on consensus forecasts for Volex), is expected to be below 0.4x by the end of Volex’s financial year ending 4 April 2021. Conservative approach to leverage remains unchanged with flexibility for dividends and future bolt-on acquisitions

Commenting on the acquisition, Nat Rothschild Executive Chairman of Volex said:

“The acquisition of DEKA is an exceptional opportunity for Volex and is expected to be significantly earnings enhancing in the first full year of ownership. As one of the two leading power cord producers in Europe, with a strong management team and an impressive customer list, DEKA is a perfect fit with our business model. Furthermore, it accelerates our strategy of creating the most efficient and lowest-cost producer in the industry, providing an immediate and scalable European platform. The business has an excellent track record and is positioned well in high structural growth end-segments such as White Goods to deliver exciting growth in the future.”